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T-Mobile has put a lot of energy behind its "uncarrier" marketing campaign that offers no contract and unlimited calling, data and text. But Washington State Attorney General Bob Ferguson didn't like what he heard.

In fact, Ferguson characterized it as deceptive advertising, promising consumers no annual contracts while carrying hidden charges for terminating early. He got a court order against the wireless carrier forcing it to clearly communicate the limitations of the new "no-contract" wireless service plans.

"As Attorney General, my job is to defend consumers, ensure truth in advertising, and make sure all businesses are playing by the rules," Ferguson said. "My office identified that T-Mobile was failing to adequately disclose a critical component of their new plan to consumers, and we acted quickly to stop this practice and protect consumers across the country from harm."

The Fine Print

T-Mobile recently launched a new type of wireless service plan, claiming to offer "no restrictions," "no annual contract" and no requirement that the consumer "serve a two-year sentence." However, the new plan does not include a phone. Instead, the company provides the option for consumers to purchase a phone at a monthly rate over a two-year term. T-Mobile also offers the opportunity to bring your own phone or pay the entire cost of the phone up front.

After an investigation of the company's practices, Ferguson's office decided T-Mobile failed to adequately disclose that customers who purchase a phone using the 24-month payment plan must carry a wireless service agreement with T-Mobile for the entire 24 months -- or pay the full balance owed on the phone if they cancel earlier.

Consumers who cancel their wireless service face an unanticipated balloon payment for the phone equipment -- in some cases higher than termination fees for other wireless carriers depending on how early they cancel.

T-Mobile has to pay attorneys' fees and costs to the Attorney General's Office in the amount of $26,046.40, and customers who purchased T-Mobile service and equipment between March 26 and April 25 can return their phones for a full refund and cancel their service plans without being required to pay the remaining balance owed on their devices.

Play by the Rules

We asked Jeff Kagan, a telecom industry analyst in Atlanta, about the court order.
"It looks like spunky T-Mobile got caught with their britches down," he told us. "I like the fiery new CEO John Legere and his over-the-top behavior. It gets lots of media attention and good attention is just what T-Mobile needs. They have needed it for quite a while. However, T-Mobile must not cross over the line, and according to the Washington attorney general, that's what they did. And I fear that will hurt them."

As Kagan sees it, the issue with the attorney general doesn't look good. Indeed, he noted, companies can spend years building trust and a strong relationship with customers and lose it all in the snap of two fingers. While he hopes T-Mobile is successful in building a stronger company via the MetroPCS merger, he encourages the wireless carrier to play by the rules.

"There is plenty of room to grow if you do business the right way," Kagan said. "Just look at companies like AT&T Mobility and Verizon Wireless as two strong examples."